Suddenly, everybody loves real estate. Trade publications regularly trumpet surging capital for U.S. real estate. Pension funds are expanding their programs or launching new ones, international investors are ratcheting up their activity, and defined contribution plans are looking hard at “real” assets.

At the same time, scores of managers are introducing dozens of funds with investment strategies all along the risk spectrum. The demand for capital seems unquenchable. More investment capital for real estate should be good news — rain in the desert, so to speak. But deserts are famous for mirages. So what is really going on? Is there, in fact, a flood of new investment capital? If so, what will happen to cap rates and pricing? And what about the comfortable yields investors have come to expect?

The U.S. economy is slowly improving, and real estate markets are reasonably healthy. Transactions are on the rise — up by more than 27 percent for the first